IDEAS home Printed from https://ideas.repec.org/a/eee/hepoli/v100y2011i1p4-17.html
   My bibliography  Save this article

The cost of drug development: A systematic review

Author

Listed:
  • Morgan, Steve
  • Grootendorst, Paul
  • Lexchin, Joel
  • Cunningham, Colleen
  • Greyson, Devon

Abstract

Objectives We aimed to systematically review and assess published estimates of the cost of developing new drugs.Methods We sought English language research articles containing original estimates of the cost of drug development that were published from 1980 to 2009, inclusive. We searched seven databases and used citation tracing and expert referral to identify studies. We abstracted qualifying studies for information about methods, data sources, study samples, and key results.Results Thirteen articles were found to meet our inclusion criteria. Estimates of the cost of drug development ranged more than 9-fold, from USD$92 million cash (USD$161 million capitalized) to USD$883.6 million cash (USD$1.8 billion capitalized). Differences in methods, data sources, and time periods explain some of the variation in estimates. Lack of transparency limits many studies. Confidential information provided by unnamed companies about unspecified products forms all or part of the data underlying 10 of the 13 studies.Conclusions Despite three decades of research in this area, no published estimate of the cost of developing a drug can be considered a gold standard. Studies on this topic should be subjected to reasonable audit and disclosure of - at the very least - the drugs which authors purport to provide development cost estimates for.

Suggested Citation

  • Morgan, Steve & Grootendorst, Paul & Lexchin, Joel & Cunningham, Colleen & Greyson, Devon, 2011. "The cost of drug development: A systematic review," Health Policy, Elsevier, vol. 100(1), pages 4-17, April.
    • Handle: RePEc:eee:hepoli:v:100:y:2011:i:1:p:4-17
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0168-8510(10)00365-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 10(2), pages 107-142, July.
    2. Light, Donald W. & Warburton, Rebecca N., 2005. "Extraordinary claims require extraordinary evidence," Journal of Health Economics, Elsevier, vol. 24(5), pages 1030-1033, September.
    3. Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2007. "Mergers and acquisitions in the pharmaceutical and biotech industries," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 307-328.
    4. Joseph Dimasi & Henry Grabowski & John Vernon, 1995. "R&D Costs, Innovative Output and Firm Size in the Pharmaceutical Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 2(2), pages 201-219.
    5. Grabowski, Henry G. & Vernon, John M., 1994. "Returns to R&D on new drug introductions in the 1980s," Journal of Health Economics, Elsevier, vol. 13(4), pages 383-406.
    6. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2005. "Extraordinary claims require extraordinary evidence," Journal of Health Economics, Elsevier, vol. 24(5), pages 1034-1044, September.
    7. Christopher Paul Adams & Van Vu Brantner, 2010. "Spending on new drug development," Health Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 130-141, February.
    8. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Feng Xie, 2018. "Highly Priced Gene Therapies: A Wake-Up Call for Early Price Regulation," PharmacoEconomics, Springer, vol. 36(8), pages 883-888, August.
    2. Wittmann, Nadine, 2014. "Economic reasoning on the correlation between life expectancy and economic development: Exploring alternative routes," Economics Discussion Papers 2014-43, Kiel Institute for the World Economy (IfW Kiel).
    3. G. Kent Fellows & Daniel J. Dutton & Aidan Hollis, 2018. "Making Sure Orphan Drugs Don’t Get Left Behind," SPP Communique, The School of Public Policy, University of Calgary, vol. 10(6), August.
    4. Graddy-Reed, Alexandra, 2020. "Getting ahead in the race for a cure: How nonprofits are financing biomedical R&D," Research Policy, Elsevier, vol. 49(8).
    5. von Bandemer, Stephan & Merkel, Sebastian & Nimako-Doffour, Anna, 2012. "Medizinisch-technische Innovationen in der Gesundheitswirtschaft am Beispiel der Neuen Untersuchungs- und Behandlungsmethoden (NUB)," Forschung Aktuell 04/2012, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    6. Vargas-Peláez, Claudia Marcela & Soares, Luciano & Rover, Marina Raijche Mattozo & Blatt, Carine Raquel & Mantel-Teeuwisse, Aukje & Rossi Buenaventura, Francisco Augusto & Restrepo, Luis Guillermo & L, 2017. "Towards a theoretical model on medicines as a health need," Social Science & Medicine, Elsevier, vol. 178(C), pages 167-174.
    7. Charles Baum & Katherine Andino & Eric Wittbrodt & Shelley Stewart & Keith Szymanski & Robin Turpin, 2015. "The Challenges and Opportunities Associated with Reimbursement for Obesity Pharmacotherapy in the USA," PharmacoEconomics, Springer, vol. 33(7), pages 643-653, July.
    8. van Rijnsoever, Frank J. & Eveleens, Chris P., 2021. "Money Don't matter? How incubation experience affects start-up entrepreneurs' resource valuation," Technovation, Elsevier, vol. 106(C).
    9. Marijn A. Weele & Frank J. Rijnsoever & Menno Groen & Ellen H. M. Moors, 2020. "Gimme shelter? Heterogeneous preferences for tangible and intangible resources when choosing an incubator," The Journal of Technology Transfer, Springer, vol. 45(4), pages 984-1015, August.
    10. Ria Christine Siagian & Dumilah Ayuningtyas, 2019. "Gap analysis for drug development policy-making: An attempt to close the gap between policy and its implementation," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-13, August.
    11. Volker Grossmann, 2021. "Medical Innovations and Ageing: A Health Economics Perspective," CESifo Working Paper Series 9387, CESifo.
    12. Hollis, Aidan & Ahmed, Ziana, 2014. "The path of least resistance: Paying for antibiotics in non-human uses," Health Policy, Elsevier, vol. 118(2), pages 264-270.
    13. Makai, Peter & Brouwer, Werner B.F. & Koopmanschap, Marc A. & Stolk, Elly A. & Nieboer, Anna P., 2014. "Quality of life instruments for economic evaluations in health and social care for older people: A systematic review," Social Science & Medicine, Elsevier, vol. 102(C), pages 83-93.
    14. Massimo Florio & Chiara Pancotti, 2022. "European pharmaceutical research and development. Could a public infrastructure overcome market failures?," Working Papers 202202, CSIL Centre for Industrial Studies.
    15. Veronika Fenyves & Balazs Nyul & Krisztina Dajnoki & Zoltan Bacs & Gergo Tomori, 2019. "Profitability of Pharmaceutical Companies in the Visegrád Countries," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(4), pages 99-111.
    16. Stefano Capri, 2020. "High prices of new drugs: we are ready to do whatever it takes," LIUC Papers in Economics 2020-8, Cattaneo University (LIUC).
    17. Uwe Kehrel & Kai Klischan & Nathalie Sick, 2016. "Why Research Partnerships Fail in the Biotechnology Sector — An Empirical Analysis of Strategic Partnerships," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 1-23, February.
    18. Chen, Xu & Yang, Huan & Wang, Xiaojun, 2019. "Effects of price cap regulation on the pharmaceutical supply chain," Journal of Business Research, Elsevier, vol. 97(C), pages 281-290.
    19. Krisztian Buza & Ladislav Peška & Júlia Koller, 2020. "Modified linear regression predicts drug-target interactions accurately," PLOS ONE, Public Library of Science, vol. 15(4), pages 1-18, April.
    20. Anita Chawla & Ginger Carls & Edmund Deng & Edward Tuttle, 2015. "The Expected Net Present Value of Developing Weight Management Drugs in the Context of Drug Safety Litigation," PharmacoEconomics, Springer, vol. 33(7), pages 749-763, July.
    21. Pereira, Cristiano Gonçalves & Lavoie, Joao Ricardo & Garces, Edwin & Basso, Fernanda & Dabić, Marina & Porto, Geciane Silveira & Daim, Tugrul, 2019. "Forecasting of emerging therapeutic monoclonal antibodies patents based on a decision model," Technological Forecasting and Social Change, Elsevier, vol. 139(C), pages 185-199.
    22. Tobias Basse & Christoph Schwarzbach & J.-Matthias Schulenburg, 2023. "Dividend policy issues in the European pharmaceutical industry: new empirical evidence," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(5), pages 803-816, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ute Laermann-Nguyen & Martin Backfisch, 2021. "Innovation crisis in the pharmaceutical industry? A survey," SN Business & Economics, Springer, vol. 1(12), pages 1-37, December.
    2. Christopher Paul Adams & Van Vu Brantner, 2010. "Spending on new drug development," Health Economics, John Wiley & Sons, Ltd., vol. 19(2), pages 130-141, February.
    3. Tobias Basse & Christoph Schwarzbach & J.-Matthias Schulenburg, 2023. "Dividend policy issues in the European pharmaceutical industry: new empirical evidence," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(5), pages 803-816, July.
    4. Barrenho, E & Smith, PC & Miraldo, M, 2013. "The determinants of attrition in drug development: a duration analysis," Working Papers 12204, Imperial College, London, Imperial College Business School.
    5. Scherer, F.M., 2010. "Pharmaceutical Innovation," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 539-574, Elsevier.
    6. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
    7. Billette de Villemeur, Etienne & Versaevel, Bruno, 2019. "One lab, two firms, many possibilities: On R&D outsourcing in the biopharmaceutical industry," Journal of Health Economics, Elsevier, vol. 65(C), pages 260-283.
    8. Gregor Dorfleitner & Felix Rößle, 2018. "The financial performance of the health care industry: a global, regional and industry specific empirical investigation," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(4), pages 585-594, May.
    9. Costello, Christopher & Ward, Michael, 2006. "Search, bioprospecting and biodiversity conservation," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 615-626, November.
    10. Bruce Rasmussen, 2010. "Innovation and Commercialisation in the Biopharmaceutical Industry," Books, Edward Elgar Publishing, number 13680.
    11. Sorisio, Enrico & Strøm, Steinar, 2006. "Innovation and market dynamics in the EPO market," Memorandum 12/2006, Oslo University, Department of Economics.
    12. Pierre Dubois & Olivier de Mouzon & Fiona Scott-Morton & Paul Seabright, 2015. "Market size and pharmaceutical innovation," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 844-871, October.
    13. Toole, Andrew A., 2012. "The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry," Research Policy, Elsevier, vol. 41(1), pages 1-12.
    14. Hans H. Bauer & Marc Fischer & Volker Pfahlert, 2001. "Lohnt sich für Pharmaunternehmen der Markteintritt als Late Mover? — Ergebnisse einer Rentabilitätsanalyse," Schmalenbach Journal of Business Research, Springer, vol. 53(6), pages 632-648, September.
    15. Lazonick, William & Tulum, Öner, 2011. "US biopharmaceutical finance and the sustainability of the biotech business model," Research Policy, Elsevier, vol. 40(9), pages 1170-1187.
    16. Bauer, Hans H. & Fischer, Marc, 2000. "Product life cycle patterns for pharmaceuticals and their impact on R&D profitability of late mover products," International Business Review, Elsevier, vol. 9(6), pages 703-725, December.
    17. Toole, Andrew A., 2011. "The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry," ZEW Discussion Papers 11-063, ZEW - Leibniz Centre for European Economic Research.
    18. Branstetter, Lee & Chatterjee, Chirantan & Higgins, Matthew J., 2022. "Generic competition and the incentives for early-stage pharmaceutical innovation," Research Policy, Elsevier, vol. 51(10).
    19. Grabowski, Henry & Vernon, John & DiMasi, Joseph, 2002. "Returns on R&D for 1990s New Drug Introductions," Working Papers 02-21, Duke University, Department of Economics.
    20. Ming Liu & Sumner LaCroix, 2011. "The Impact of Stronger Property Rights in Pharmaceuticals on Innovation in Developed and Developing Countries," Working Papers 201116, University of Hawaii at Manoa, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:hepoli:v:100:y:2011:i:1:p:4-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu or the person in charge (email available below). General contact details of provider: http://www.elsevier.com/locate/healthpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.